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Date: 11-01-2017

Case Style:

United States of America v. Leon Fadden

Seventh Circuit Court of Appeals Courthouse - Chicago, Illinois

Case Number: 17-1400

Judge: Kanne

Court: United States Court of Appeals for the Seventh Circuit on appeal from the Western District of Wisconsin (Dane County)

Plaintiff's Attorney: Meredith P. Duchemin and Daniel J. Graber

Defendant's Attorney: Joseph Aragorn Bugni - FPD

Description: A grand jury returned a three-count
indictment against Leon Fadden for conduct related to bankruptcy
fraud. Before trial, Fadden proposed a theory-of-defense
jury instruction for Counts 1 and 2. The district court
rejected that instruction, instead reciting the Seventh Circuit
Pattern Instructions. A jury convicted Fadden of all three
counts. Fadden now appeals his convictions on Counts 1 and
2 No. 17-1400
2, arguing that the district court denied him a fair trial by refusing
to read the jury his theory-of-defense instructions. We
affirm.
I. BACKGROUND
Leon Fadden believed that the Internal Revenue Code did
not apply to him. From 2005 to 2013, he earned over $100,000
per year but did not submit tax returns. After an audit, the IRS
determined that Fadden owed back taxes and began to garnish
his wages.
Facing further levies on his paycheck, Fadden filed for
bankruptcy. This filing triggered an automatic stay that prevented
the IRS from collecting during his bankruptcy case.
The following month, Fadden filed bankruptcy schedules—
forms in which the debtor lists financial information such as
debts, assets, income, and expenses. There, Fadden claimed
that he had no legal, equitable, or future interest in any real
property. He also claimed that he had no interest in any decedent’s
life insurance policy or estate.
But Fadden’s schedules did not tell the whole story. Before
he filed for bankruptcy, Fadden knew that he would receive
proceeds from the sale of his mother’s home—at the time
listed by the executor of his mother’s estate for $525,000. And
Fadden knew that he would receive thousands of dollars as a
beneficiary on two of his mother’s life insurance policies.
Three days before Fadden was scheduled to meet with the
bankruptcy trustee—and more than a week after filing his
schedules—Fadden spoke to a paralegal in the U.S. Trustee’s
Office. During that conversation, Fadden mentioned for the
first time that he was entitled to an inheritance and asked to
postpone his bankruptcy. But when Fadden finally met with
No. 17-1400 3
his bankruptcy trustee and an attorney for the U.S. Trustee, he
confirmed that his schedules were accurate and denied receiving
an inheritance. He also denied having spoken to the
paralegal at the U.S. Trustee’s Office.
A grand jury returned a three-count indictment against
Fadden for his failure to report these assets and for his statements
during the meeting. Count 1 charged him with violating
18 U.S.C. § 152(1) by concealing assets in bankruptcy.
Count 2 charged him with violating 18 U.S.C. § 152(3) by making
false declarations on his bankruptcy schedules and statement
of financial affairs. Count 3 charged him with violating
18 U.S.C. § 1001(a)(2) by making false statements during the
investigation of his bankruptcy.
Counts 1 and 2 required the government to prove that
Fadden acted with an intent to deceive. At trial, Fadden
planned to argue that the government hadn’t shown that he
acted with that intent. To bolster this strategy, Fadden proposed
the following theory-of-defense instruction:
It is the theory of the defense that Mr. Fadden
did not fail to disclose his inheritance on the
schedules for the purpose of deceiving the
bankruptcy trustee. Rather, his omissions were
part of his continued failures to abide by the
particulars demanded in the bankruptcy filings
and his course of conduct throughout the bankruptcy,
which is inconsistent with an intent to
deceive. If you find that Fadden’s omissions as
charged in counts 1 and 2 were not made with
an intent to deceive you must find him not
guilty of those counts.
(R. 110 at 5.)
4 No. 17-1400
The court rejected Fadden’s instruction and instead recited
the pattern instructions for the charged offenses. See Pattern
Criminal Jury Instructions of the Seventh Circuit, 134, 136, 272
(2012 ed., rev. 2013). For the intent component of Count 1, the
court instructed that “the government must prove … [t]he defendant
knowingly concealed [assets] … [and] acted fraudulently,
that is with the intent to deceive any creditor or the
bankruptcy judge.” (R. 124, Trial Tr., at 136.) As to Count 2,
the court told the jury that “the government must prove …
[t]he defendant made the declaration, certification or verification
under penalty of perjury knowingly and with the intent
to deceive any creditor, the trustee or the bankruptcy judge.”
(Id. at 137.) In addition to delivering the elements of Counts 1
and 2—both of which included the requirement that the government
prove “intent to deceive”—the court told the jurors
that “knowingly means that the defendant realized what he
was doing and was aware of the nature of his conduct and did
not act through ignorance, mistake or accident.” (Id. at 139–
140.)
Throughout the trial, Fadden insisted that it was sloppiness
rather than an intent to deceive that led him to omit assets
from his schedules. During his opening statement, Fadden’s
appointed counsel argued that Fadden is a tax cheat and
that he doesn’t believe he has to pay taxes. Counsel then argued
that Fadden was determined to use the bankruptcy proceeding’s
automatic stay as a lifeline while he collected his inheritance.
Fadden contended that he did so carelessly: he got
his instructions from Google and did none of the things he
needed to do when filing for bankruptcy. Fadden explained
that “the heart of this case … is whether … [he] had an intent
to deceive.” (R. 123, Trial Tr., at 28.) And he argued that the
inconsistencies between his answers on his bankruptcy filings
No. 17-1400 5
and his interactions with government officials demonstrate
that he did not have that intent.
Fadden returned to his theory-of-defense at closing. He related
what he saw as the key details—his filing, his receipt of
the inheritance, his failure to follow any of the requirements
of the bankruptcy proceeding, and his conversations with
government officials. Fadden told the jury that those details
showed that “there just wasn’t an intent to deceive.” (R. 124,
Trial Tr., at 169.) After closing arguments, the court read the
jury its instructions. The jury found Fadden guilty of each
count.
On appeal, Fadden challenges the district court’s denial of
his theory-of-defense instruction as to counts 1 and 2. This,
Fadden argues, denied him a fair trial. We find that Fadden
was not entitled to this instruction, so we affirm.
II. ANALYSIS
In general, a defendant is entitled to a theory-of-defense
instruction if: the instruction represents a correct statement of
the law; the evidence supports the instruction; the theory of
defense is not part of the charge to the jury; and the denial of
the instruction would deprive the defendant a fair trial. E.g.,
United States v. Jackson, 598 F.3d 340, 349 (7th Cir. 2010). We
review the district court’s denial of Fadden’s instruction de
novo. United States v. Canady, 578 F.3d 665, 672 (7th Cir. 2009).
In part, Fadden’s instruction fails because it restates the district
court’s charge. To the extent that it does not, it misstates
the law. Therefore, the district court correctly concluded that
Fadden was not entitled to his theory-of-defense instruction.
Fadden argues that his statement of law appears in the final
sentence of his proposed instructions—“If you find that
6 No. 17-1400
Fadden’s omissions as charged in Counts 1 and 2 were not
made with an intent to deceive you must find him not guilty
of those counts.” In essence, this would tell jurors not to find
Fadden guilty if they found that he acted without an intent to
deceive. While that statement of the law is accurate, the court
already told the jury all it needed to know. On both counts,
the court instructed the jury that the government needed to
demonstrate that Fadden acted with “intent to deceive.” A defendant
is not entitled to the logical equivalent of an instruction
the court provides. See Canady, 578 F.3d at 672.
To the extent that Fadden’s instruction goes beyond the
district court’s, it misstates the law. Fadden also asked the district
court to instruct the jury that his “omissions were part of
his continued failures to abide by the particulars demanded
in the bankruptcy filings and his course of conduct throughout
the bankruptcy, which is inconsistent with an intent to deceive.”
(R. 110 at 5 (emphasis added).) Yet finding that Fadden
was careless and that he acted with an intent to deceive would
have been entirely consistent with the statute. Instructing the
jury otherwise, as Fadden requested, would have misstated
the law.
III. CONCLUSION
The jury heard Fadden’s defense through the court’s
charge and during opening and closing arguments. It wasn’t
persuaded. Fadden’s argument that the district court erroneously
denied his theory-of-defense instruction falls short as
well. In part, Fadden’s instruction fails because it did not add
any information beyond the court’s instruction. And the portion
that went beyond the court’s instruction misstates the
No. 17-1400 7
law. Fadden concedes that he lost a fair fight on Count 3. The
same is true for Counts 1 and 2.

Outcome: AFFIRMED.

Plaintiff's Experts:

Defendant's Experts:

Comments:



 
 
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